Many New Zealanders dream of owning an investment property — but they picture a house that they rent out.
That means they’re not even thinking about commercial properties, like shops, warehouses, offices. And that’s missing an opportunity.
The mere fact that many people automatically go for residential makes commercial more interesting. If you zig while others zag, it can help you stay ahead of the game.
But let’s start with the commercial property cons. It’s often more expensive to begin with, so it may be a 10-year investment plan.
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Or you might want to team up with friends (and sign a legal agreement on how your co-investment will work).
It can also take longer to find a tenant. Everyone needs a home, but businesses can take longer to find their perfect space.
However, there are pros to balance out the cons. It’s a huge wealth builder.
Each year the NBR rich list shows most wealthy people made their money in property — and much of that is commercial property.
While it may be harder to find a tenant, once you do, they’re often locked in for several years.
Listen to the podcast below on the topic and scroll down for more episodes in the series
To make sure it’s successful, there are a few factors to consider. If it’s a shop, is it close to foot traffic or offices full of potential customers?
If it’s an office, is it close to public transport, or does it have lots of parking? For warehousing, is it close to main transport networks.
You should also make sure your expected rent will earn you more than if you just whacked the money in the bank and forgot about it.
Remember to consider your mortgage expenses, rates, any body corporate fees, a maintenance allowance, and the possibility of a few weeks of missed rent.
Weigh those annual costs up against the annual rent you’re expecting — and make sure you’re substantially in the black.
Woe betide you if you try to treat it as a passive investment. No property is. Remember, people’s lives are being lived within your properties.
There’s also a financial reason to treat people well. A neglected or, worse, trashed property could cost more to fix than you ever got in profits.
Listen to other episodes in the series:
How to budget for a house deposit without depriving yourself
How first-home buyers can build their own unique solution
Could the rule of 100 turn around your fortunes?
Is NZ ready for first-home buyer landlords?
The tough talk you need to have when saving for a house
How to house hack your way to smaller household bills
Is now the time to get nervous about your KiwiSaver?
How to solve land headaches
Renovate or detonate?
Apartment v house
How to crush the debt
Tricks for paying off the mortgage faster
The power of location
Negotiating a mortgage
Saving for a deposit
Buy v rent
- Frances Cook is the host of the personal finance podcast Cooking the Books. She is not a financial adviser, and all information is general in nature. For individual advice, see a financial adviser. Listen to her podcast on OneRoof.co.nz
